The Development Bank of Latin America and the Caribbean (CAF, by its Spanish initials) approved a US$960 million loan for Argentina at an extraordinary virtual meeting on Friday. The loan is a short-term liquidity bridge to support the country’s debt payments to the International Monetary Fund (IMF).

The CAF’s board of directors approved the loan unanimously following consultations and co-ordination with the IMF and other multilateral banks. It is intended to help Argentina to continue implementing its IMF-backed economic program. CAF said in a release that the goal of the loan was “to support [Argentina’s] fiscal, monetary and exchange rate policies, as well as to diversify and execute its public debt strategy.”

Argentina must pay US$912 million to the IMF before December 21, in line with the deal it made with the fund in 2022. The Fund backed the loan in a post on X where it said it would help its balance of payments and “the efforts of the new authorities to re-establish economic stability.”

President Javier Milei’s administration informally sounded out the possibility of a CAF loan during the new government’s inauguration ceremony on Sunday 10 December. CAF representatives went on to hold a meeting with Argentina’s new government on Wednesday, where the administration formally requested the credit from the institution.

CAF president and vice-president Sergio Díaz Granados and Christian Asinelli, Argentina’s chief of staff Nicolás Posse, Economy Minister Luis Caputo, and Finance Secretary Pablo Quirno participated in the meeting.

The government sought the funds from the CAF because it is one of the few multilateral banks that can provide quick financial assistance, as its board of directors can be summoned ad-hoc.

A source with knowledge of the matter told the Herald that Argentina’s main concern was to get a financing source for next week’s maturity with the IMF. The loan is approximately US$48 million more than Argentina has to pay to the lender on Thursday. Sources in the Economy Ministry did not say whether the rest of the loan would be used for social assistance, as some analysts expect.

On Friday, the day the loan was approved, the newly-created Ministry of Human Capital announced a AR$10,000 (US$12 at the official exchange rate, US$10 at the MEP rate) bonus for recipients of the Potenciar Trabajo welfare program. Asked by the Herald if the CAF loan would be used to finance the bonus, a spokesperson for the ministry said that the payment had been agreed by the previous government.

The IMF is a critical actor in Argentina’s economy and politics. After former President Mauricio Macri took out a record US$44 billion loan in 2018, former President Alberto Fernández’s team renegotiated the deal and reached an extended fund facility program in 2022. The new agreement includes an economic program that Argentina must comply with to receive disbursements every three months, which the government uses to pay the previous debt. This year, however, Argentina has to pay the IMF more than it will receive from the lender.

“We are reformulating the agreement, which had fallen through,” Caputo said on Thursday during an interview with TN. “We are going to pay the maturities with the IMF.”

Milei and his top officials approached the IMF for fresh funding during a trip to Washington before taking office, but they have not secured any new financing to date. However, the lender welcomed the steep devaluation and austerity measures Caputo announced on Tuesday. 

“These bold initial actions aim to significantly improve public finances in a manner that protects the most vulnerable in society and strengthen the foreign exchange regime,” the Fund’s head Kristalina Georgieva said on X.